Shareholders' Equity

6 Months Ended

Jun. 30, 2019

Note 16 – Shareholders’ Equity

Regulatory Capital

Trustmark and TNB are subject to minimum risk-based capital and leverage capital requirements, as described in the section captioned “Capital Adequacy” included in Part I. Item 1. – Business of Trustmark’s 2018 Annual Report on Form 10-K, which are administered by the federal bank regulatory agencies. These capital requirements, as defined by federal regulations, involve quantitative and qualitative measures of assets, liabilities and certain off-balance sheet instruments. Trustmark’s and TNB’s minimum risk-based capital requirements include a capital conservation buffer of 2.500% at June 30, 2019 and 1.875% at December 31, 2018. Accumulated other comprehensive loss, net of tax, is not included in computing regulatory capital. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements of Trustmark and TNB and limit Trustmark’s and TNB’s ability to pay dividends. As of June 30, 2019, Trustmark and TNB exceeded all applicable minimum capital standards. In addition, Trustmark and TNB met applicable regulatory guidelines to be considered well-capitalized at June 30, 2019. To be categorized in this manner, Trustmark and TNB maintained minimum common equity Tier 1 risk-based capital, Tier 1 risk-based capital, total risk-based capital and Tier 1 leverage ratios as set forth in the accompanying table, and were not subject to any written agreement, order or capital directive, or prompt corrective action directive issued by their primary federal regulators to meet and maintain a specific capital level for any capital measures. There are no significant conditions or events that have occurred since June 30, 2019, which Management believes have affected Trustmark’s or TNB’s present classification.

The following table provides Trustmark’s and TNB’s actual regulatory capital amounts and ratios under regulatory capital standards in effect at June 30, 2019 and December 31, 2018 ($ in thousands):

	Actual
	Regulatory Capital					Minimum			To Be Well
	Amount		Ratio			Requirement			Capitalized
At June 30, 2019:
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,269,353		11.76	%		7.000	%	n/a
Trustmark National Bank		1,309,962		12.14	%		7.000	%		6.50	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,329,353		12.31	%		8.500	%	n/a
Trustmark National Bank		1,309,962		12.14	%		8.500	%		8.00	%

Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,411,150		13.07	%		10.500	%	n/a
Trustmark National Bank		1,391,759		12.89	%		10.500	%		10.00	%

Tier 1 Leverage (to Average Assets)
Trustmark Corporation	$	1,329,353		10.03	%		4.00	%	n/a
Trustmark National Bank		1,309,962		9.90	%		4.00	%		5.00	%

At December 31, 2018:
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,271,538		11.77	%		6.375	%	n/a
Trustmark National Bank		1,311,548		12.14	%		6.375	%		6.50	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,331,538		12.33	%		7.875	%	n/a
Trustmark National Bank		1,311,548		12.14	%		7.875	%		8.00	%

Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,412,059		13.07	%		9.875	%	n/a
Trustmark National Bank		1,392,069		12.89	%		9.875	%		10.00	%

Tier 1 Leverage (to Average Assets)
Trustmark Corporation	$	1,331,538		10.26	%		4.00	%	n/a
Trustmark National Bank		1,311,548		10.13	%		4.00	%		5.00	%

Stock Repurchase Program

On March 11, 2016, the Board of Directors of Trustmark authorized a stock repurchase program under which $100.0 million of Trustmark’s outstanding common stock may be acquired through March 31, 2019. Trustmark repurchased approximately 1.2 million shares of its common stock valued at $36.9 million during the three months ended March 31, 2019. Under this authority, Trustmark repurchased approximately 3.2 million shares valued at $100.0 million.

The Board of Directors of Trustmark authorized a new stock repurchase program effective April 1, 2019 under which $100.0 million of Trustmark’s outstanding common stock may be acquired through March 31, 2020. The adoption of this new stock repurchase program followed the receipt of non-objection from the FRB. The shares may be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on market conditions. During the three months ended June 30, 2019, Trustmark repurchased approximately 398 thousand shares of its common stock valued at $13.0 million.

Together, with the repurchases under the previous program, Trustmark purchased approximately 1.6 million shares of its common stock valued at $49.9 million during the six months ended June 30, 2019, compared to 243 thousand shares valued at $7.9 million repurchased during the six months ended June 30, 2018.

Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss

The following tables present the net change in the components of accumulated other comprehensive loss and the related tax effects allocated to each component for the periods presented ($ in thousands). The amortization of prior service cost, recognized net loss due to lump sum settlements and change in net actuarial loss are included in the computation of net periodic benefit cost (see Note 11 – Defined Benefit and Other Postretirement Benefits for additional details). Reclassification adjustments related to pension and other postretirement benefit plans are included in salaries and employee benefits and other expense in the accompanying consolidated statements of income. Reclassification adjustments related to the cash flow hedge derivative are included in other interest expense in the accompanying consolidated statements of income.

	Three Months Ended June 30, 2019									Three Months Ended June 30, 2018
	Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount			Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount

Securities available for sale and transferred securities:
Net unrealized holding gains (losses) arising during the period	$	20,079		$	(5,020	)	$	15,059		$	(9,275	)	$	2,320		$	(6,955	)
Change in net unrealized holding loss on securities transferred to held to maturity		1,256			(314	)		942			971			(243	)		728
Total securities available for sale and transferred securities		21,335			(5,334	)		16,001			(8,304	)		2,077			(6,227	)
Pension and other postretirement benefit plans:
Reclassification adjustments for changes realized in net income:
Net change in prior service costs		62			(15	)		47			62			(16	)		46
Recognized net loss due to lump sum settlements		63			(16	)		47			40			(10	)		30
Change in net actuarial loss		247			(61	)		186			363			(91	)		272
Total pension and other postretirement benefit plans		372			(92	)		280			465			(117	)		348
Cash flow hedge derivatives:
Change in accumulated gain (loss) on effective cash flow hedge derivatives		(101	)		25			(76	)		132			(33	)		99
Reclassification adjustment for (gain) loss realized in net income		(141	)		35			(106	)		(99	)		26			(73	)
Total cash flow hedge derivatives		(242	)		60			(182	)		33			(7	)		26
Total other comprehensive income (loss)	$	21,465		$	(5,366	)	$	16,099		$	(7,806	)	$	1,953		$	(5,853	)

	Six Months Ended June 30, 2019									Six Months Ended June 30, 2018
	Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount			Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount
Securities available for sale and transferred securities:
Net unrealized holding gains (losses) arising during the period	$	38,903		$	(9,726	)	$	29,177		$	(37,314	)	$	9,329		$	(27,985	)
Change in net unrealized holding loss on securities transferred to held to maturity		2,003			(501	)		1,502			1,936			(484	)		1,452
Total securities available for sale and transferred securities		40,906			(10,227	)		30,679			(35,378	)		8,845			(26,533	)
Pension and other postretirement benefit plans:
Reclassification adjustments for changes realized in net income:
Net change in prior service costs		125			(31	)		94			125			(32	)		93
Recognized net loss due to lump sum settlements		94			(23	)		71			80			(19	)		61
Change in net actuarial loss		502			(126	)		376			731			(183	)		548
Total pension and other postretirement benefit plans		721			(180	)		541			936			(234	)		702
Cash flow hedge derivatives:
Change in accumulated gain (loss) on effective cash flow hedge derivatives		(164	)		41			(123	)		559			(140	)		419
Reclassification adjustment for (gain) loss realized in net income		(312	)		78			(234	)		(105	)		27			(78	)
Total cash flow hedge derivatives		(476	)		119			(357	)		454			(113	)		341
Total other comprehensive income (loss)	$	41,151		$	(10,288	)	$	30,863		$	(33,988	)	$	8,498		$	(25,490	)

The following table presents the changes in the balances of each component of accumulated other comprehensive loss for the periods presented ($ in thousands). All amounts are presented net of tax.

	Securities Available for Sale and Transferred Securities			Defined Benefit Pension Items			Cash Flow Hedge Derivatives			Total
Balance at January 1, 2019	$	(43,824	)	$	(12,324	)	$	469		$	(55,679	)
Other comprehensive income (loss) before reclassification		30,679			—			(123	)		30,556
Amounts reclassified from accumulated other comprehensive loss		—			541			(234	)		307
Net other comprehensive income (loss)		30,679			541			(357	)		30,863
Balance at June 30, 2019	$	(13,145	)	$	(11,783	)	$	112		$	(24,816	)

Balance at January 1, 2018	$	(26,535	)	$	(13,468	)	$	278		$	(39,725	)
Other comprehensive income (loss) before reclassification		(26,533	)		—			419			(26,114	)
Amounts reclassified from accumulated other comprehensive loss		—			702			(78	)		624
Net other comprehensive income (loss)		(26,533	)		702			341			(25,490	)
Reclassification of certain income tax effects related to the change in the federal statutory income tax rate under the Tax Reform Act		(5,694	)		(2,890	)		60			(8,524	)
Balance at June 30, 2018	$	(58,762	)	$	(15,656	)	$	679		$	(73,739	)